None of Medibank Private's almost 4 million policyholders nor its 4000 staff will receive preferential treatment such as share allocations when the government-owned insurer is privatised next year.

Finance Minister Mathias Cormann announced the sale of the health insurance giant on Wednesday - the first major asset sale by the Abbott government - hoping to net taxpayers up to $4 billion.

Medibank Private staff and customers will receive no preferential treatment when the insurer is privatised. Photo: Glenn Hunt

The sale is planned for financial year 2014-15, with the proceeds to be spent on infrastructure.

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Dashing hopes of an equity windfall for millions of lifelong policyholders, he said Medibank Private belonged exclusively to the government because customers had purchased health insurance not fund membership.

But the one-off windfall may also cost the government in the longer term as it is the biggest revenue earner on Canberra's books, pulling in $315 million in 2013.

''Medibank Private will be sold through an initial public offering in the 2014-15 financial year,'' Senator Cormann said on Wednesday.

Labor's finance spokesman, Tony Burke, said it would cost taxpayers but there was nothing to stop the sale because enabling legislation passed in 2006.

''Medibank Private delivers a dividend to the government that ranges in the order of between $350 million and $500 million per year,'' Mr Burke said.

''The impact on the deficit from today's decision is quite straightforward - the government in one move adds in the order of about half a billion dollars to Australia's deficit each year.''

But Stephen Anthony, a former Treasury official, said the government could achieve cost neutrality from the proceeds of the sale.

''If you get a good price for it, it's possible that you'll reduce public debt interest by an amount up to something like what you were earning from it,'' he said.

The long-planned-for sale has sparked fresh concerns about competition in the sector and the possibility of increased private health insurance premiums in a market no longer influenced by a large government-owned player.

But Senator Cormann said a scoping study had identified ''no evidence that premiums would increase as a result of the sale''.

Steve Hambleton, the president of the Australian Medical Association, said he was ''somewhat reassured'' by Senator Cormann's comments that the scoping study had found no evidence that premiums would rise as a result of a sale.

Consumer Health Forum spokesman Mark Metherell said it did not oppose the sale, but argued the proceeds should be invested in the health system.

45 comments

Who gets the success fee after the sale? I believe it could be up to 15%.

Commenter

Dieter

Location

Varsity Lakes

Date and time

March 27, 2014, 8:13AM

Not only that...but it seems to be just another AWH(jobs for boys on boards etc., and shares that will be quickly onsold to US corporates for a song, with some inbetween dodgys making a profit)...all perfectly legal because when we have the foxes in charge of the chooks, the foxes can make the rules so that the chooks can be turned into a delicious lunch....and this is just the start I feel......I can see the foxes absolutely gluttoning themselves down the track with an avalanche of privatisations fattening themselves up like never before.....watch out parliament house, it may be a goner, eventually owned by the US.

Wake up please chooks...

Commenter

Henrietta

Date and time

March 27, 2014, 9:29AM

Don't worry about after the sale, private health insurers profited to the tune of $4 billion last year and private hospitals showed a $1 billion profit.

There is $5 billion in profits from our health system going to corporation and a trickle eventually to shareholders.

Health should not be about profits, $5 billion gone from our health spend and not one patient benefited.

Commenter

Paul01

Location

Riverina

Date and time

March 27, 2014, 9:49AM

Yes, the fees. The finance sector leeches are always in favour of privatisation, because they get a percentage of the gross. They're talking their own book, so they should always be ignored.

What struck me, however, was this:

"But Stephen Anthony, a former Treasury official, said the government could achieve cost neutrality from the proceeds of the sale.

'If you get a good price for it, it's possible that you'll reduce public debt interest by an amount up to something like what you were earning from it,' he said."

Here's somebody defending the deal, but the best he can come up with is that it will be revenue neutral - if we're lucky. If we're unlucky, the reduction in public debt will save less in interest than the Budget loses in dividends. Therefore, there is no business case for the sale - it's purely a case of ideology (and fees for mates, of course).

Commenter

Greg Platt

Location

Brunswick

Date and time

March 27, 2014, 10:25AM

Paul01, Communism didn't work out to well for the Soviets

Commenter

mh

Location

Brisbane

Date and time

March 27, 2014, 10:52AM

mh...thats right....because communism was controlled by the same people who control the capitalists......

Commenter

Serfer

Date and time

March 27, 2014, 11:42AM

Exactly mh, people like Paul01 wants everything for free just as long as someone else pays for it......it worked well for afew European countries for a while. Medicare is losing billions a year and rising , how long do you think it will last until it all falls apart. Living beyond our means is not the way to do it....thank labor for racking up our biggest debt ever.

Commenter

thestupidleft

Location

portk

Date and time

March 27, 2014, 12:04PM

Why would anybody in their right mind sell a company worth less than $4 billion that is making between $350 and $500 million profit per year? Oh that's right that would be the same LNP that sold Telstra for a mere $50 billion a company that is making a profit of $4 -$5 billion per year. Why would you forgo those continuing dividends? Yep, that would be the LNP a party now governing our country that has no policies, no vision and no idea.

Incidentally, a recent academic study showed that the more a health system is privatised the more it costs. See http://theconversation.com/private-insurance-reliance-means-countries-pay-more-for-health-care-24486

As I said last week I would much prefer to pay an extra levy and have a better universal system than the one we have now

Commenter

n720ute, BMC, AGC, CCMC, OCID

Location

North Coast NSW

Date and time

March 27, 2014, 12:32PM

thestupidleft(right)....so you want medicare sold off next?....effectively a US style healthcare only more expensive, because we have the highest out of cost pockets in the world now?

Holycow auss is zooming pass and beating the US with inequality and corruptt society and pollies like a flying comet.

Boat people will soon be asking for a return journey and I will be joining them if this keeps up.

Commenter

ROO

Date and time

March 27, 2014, 12:33PM

@ mh and The stupid left. How about you compare other socialist countries that provide benefits to their population for free or a discount, like Sweden, Norway, Denmark and Germany to name a few who are doing very successfully especially Norway. But no you just keep your rose coloured glasses on and spout the LNP mantra. As for Capitalism your idol the USA is the most indebted nation on earth with a massively growing population of poor and nits debt is to a Communist country ( China). Your comments are fanciful and totally incorrect.